- 26 -
We conclude that the purchase documents unambiguously
allocated 100 percent of the consideration to William Becker’s
stock in BHC.
III. Analysis Under the Mutual Intent Test
The threshold question under the mutual intent test is
whether, at the time the purchase documents were executed, BHC
and William Becker mutually intended to allocate a portion of the
consideration to the covenant not to compete.9 Better Beverages,
Inc. v. United States, 619 F.2d 424, 429-430 (5th Cir. 1980);
Jorgl v. Commissioner, T.C. Memo. 2000-10. BHC argues that the
“parties mutually intended to allocate consideration to the
covenant.” To the contrary, William Becker, Mr. Neill, and Mr.
Dempsey all testified that, prior to the execution of the
purchase documents, there were no discussions regarding the
allocation of a portion of the consideration to the covenant not
to compete. Likewise, during his deposition, Mr. Becker
testified that “nor was there ever any discussion about
allocation. You keep using that word allocation, that was never
a thought in my mind or was never a consideration in the whole
9 Because we find that there was no mutual intent to
allocate a portion of the consideration to the covenant not to
compete, as discussed infra, we need not determine whether the
covenant had independent economic significance, was separately
bargained for, or what its economic value was at the time the
purchase documents were executed. See Better Beverages, Inc. v.
United States, 619 F.2d 424, 430-431 (5th Cir. 1980); Jorgl v.
Commissioner, T.C. Memo. 2000-10, affd. per curiam without
published opinion 264 F.3d 1145 (11th Cir. 2001).
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